GH4857

Gnuited States Senate

WASHINGTON, DC 20510-2101

~
Ss
ry =
Oo >
Apel 19, 2011 Sak 3S
zaQ7
Fan pp
voAkR NT
a752
cen 2
The Honorable Hilda Solis 3e re =
Secretary 235 2
US. Depattment of Labor “ =
200 Constitution Avenue, NW

Washington, DC 20210

Dear Secretary Solis:

We are writing with respect to the Department of Labor’s proposed regulation defining the
term “fiduciary.” We understand the Department has proposed rewriting this regulatory definition
to protect individuals from misleading investment advice. Unfortunately, after discussions with
several constituents, we fear that the regulation could result in investors receiving far less investment
information or experiencing a very significant increase in the cost of such information.

We are particularly concerned about the likely effects of the proposed regulation on
investors in individual retirement accounts (IRAs). Ata time when many Americans are struggling

to ensure themselves of a secure retirement, the Proposed change could severely limit access to low-
cost investment education and guidance services.

‘The Department should tread carefully in this important area of regulatory law. Indeed, the
Department’s own uncertainty regarding the effects of the proposed rule raises serious concerns
regarding the proposal. In the preamble to the proposed regulation, the Department states that it is
“uncertain regarding whether, and to what extent, service provider costs would increase.” The
Department also claims to be “uncertain whether the service provider market will shrink because
some service providers would view the increased costs and liability exposure associated with ERISA
fiduciary status as outweighing the benefit of continuing to scrvice the ERISA plan market.”

In light of all of this uncertainty, and our real concern that the proposal could result in less
investment education and guidance services for IRA Participants, we urge the Department to
implement a thorough review of the proposed regulation and the concerns we have raised. This is
especially important since the Department did not take the preliminary step of issuing a request for
information as is often the case when promulgating a rule of this impact. Such a review should
include an examination of the cost, market effects, and investor effects related to the proposed
regulation and a detailed analysis of the cost of the proposed regulation with respect to IRAs.

Finally, we urge the Department to tepropose the regulation. Reproposing the regulation
would ensure that Congress and the retirement plan community can review and comment on any
changes to the proposed regulation. Reproposing the regulation would also allow the Department
to work in a more coordinated fashion with the Securities and Exchange Commission, the
Commodity Futures Trading Commission, and the Treasury Department, all of which have

QaAlisaDsd


responsibilities related to the Department of ] abor’s proposed regulation. Further, in recent days,
Department officials have publicly described the need for regulatory and/or class exemptions. Such
exemptions should be published with the reproposed rule.

In closing, we harbor sincere concerns about the cffect of this proposed regulation on
investors nationwide. ‘Lhe regulation should not be finalized unul these concerns have been

thoroughly reviewed. Thank you for your consideration of this letter. We look forward to a
continued dialogue on these critical issues.

Sincerely,

NG

USS. Senator Richard Burr

Pa -
ae8Senator Johnny Isakson